Investors nurse losses after trusting sales rep

05 June 2011

By Kathleen Barrington

It is three and half years since Leo and Marie Dunne invested €130,000 in what they say they understood was a capital guaranteed fund.

The couple, long-standing Bank of Ireland customers, invested in a policy called the Financials Fund, which was sold to them by a representative of Bank of Ireland Life.

They ended up losing €48,000 of the €130,000 when they cashed in their policy three years later, after discovering their capital wasn’t guaranteed after all.

The Dunnes were just two of many investors who invested a combined €25 million in the fund in late 2007.The fund’s top ten holdings included many international banks, as well as Bank of Ireland stock.

In October 2007, Leo left Eircom after 30 years’ service. Leo, then 47, and Marie, then 46, were planning to live in Italy, where they had a home. But it would be another 13 years until Leo turned 60 and his Eircom pension would kick in. In the meantime, they were planning to live on their €230,000 savings for the next 13 years, plus some rental income from their house in Ireland.

The €230,000 was at the time earning about 3.5 per cent with ICS, another Bank of Ireland subsidiary.

The couple wanted to invest some of the money in a secure, but higher-yielding, investment.

In the autumn of 2007, they met with a Bank of Ireland Life sales representative.

They say they told the rep their main requirement was that their capital be safe and that the term of the investment not exceed three years.

They say they repeated those requirements at a second meeting with the sales rep on December 13, 2007.

They say that at the second meeting they agreed to sign up for the Financials Fund in the belief that their capital was guaranteed.

They say they signed a form and the rep filled in all the other details. They returned to Italy on December 18, 2007.

In the spring of 2008, Leo and Marie became interested in buying a more expensive house in Italy. In order to proceed with a contract, they needed to know if they could borrow from Bank of Ireland if their existing house in Italy did not sell in time.

Leo contacted the sales rep who had advised him on his Financials Fund investment.

The sales rep referred him to a loan officer.

When Leo asked the loan officer if he could use the Financials Fund as collateral for the loan, he said the loan officer told him that the capital in the Financials Fund was not guaranteed, but that he was sure it would be fine, as he himself had invested in the fund. ‘‘This obviously caused us some concern," Leo said.

Leo then e-mailed the sales rep who had originally sold him the fund.

The rep contacted him by phone. During the May 2008 phone call, Leo asked the rep if the loan officer was correct in his assertion that the capital in the Financials Fund was not secure.

Leo said the sales rep told him the loan officer was either mistaken or had misunderstood the question.

Leo and Marie returned to Ireland for a family wedding later in May and picked up the information about the Financials Fund that had been posted to their Irish address, even though they had been living in Italy since October 2007.

They became concerned that it did not appear to offer the guarantee they had asked for. They complained to Bank of Ireland Life. The company’s position was that it was clearly stated in the policy documentation that the investment was not guaranteed. It said the policy was sold in good faith, the risks were explained and that the couple had been offered a cooling-off period.

Bank of Ireland Life said in a letter that it did not hold a recording of the May telephone conversation during which Leo was allegedly reassured that the fund was guaranteed.

‘‘As such, we are unable to comment on any information or policy details provided to you during this call in relation to the security of your capital sum."

The sales rep has since left the bank and could not be reached for comment.

The Dunnes subsequently complained to the Financial Services Ombudsman that they had been mis-sold the investment. In May 2009, the Ombudsman found against them.

The Ombudsman ruled that the essence of the complaint was whether they were aware that the policy did not have a capital guarantee. The Ombudsman noted that the Dunnes had signed the personal review form which contained a declaration that they had received and read a copy of the company’s terms of business document, that they had read and understood the information provided and that it was an accurate reflection of their circumstances.

The Ombudsman also noted that the Financials Fund booklet said the illustrated benefits were not guaranteed. The Ombudsman also noted that the documents were sent to the address given on the application form in December 2007.

But the Dunnes say they didn’t know what was on the form because it was filled in by the sales rep after they had ‘‘naively’’ signed it blank. They also say that they didn’t read the documents sent to them at their Irish address because they were in Italy.

In an interview stretching over several hours at their home in Navan, Co Meath, Leo and Marie pointed to many inaccuracies in the form that they believe could prove they did not get an opportunity to review it. Chief among these is a monumental overstatement of their monthly income.

‘‘The form states we have monthly incomes of €30,000, each which is incorrect," Leo said.

The couple say the only income they had at the time was the €650 in rent from their home in Ireland. Marie said that even when she was working, she barely earned €30,000a year, never mind a month.

Unfortunately, there was no oral hearing held at which the Dunnes’ version of events could be tested against the sales rep’s account.

The Dunnes are also unhappy that they had only 21 days to make an appeal to the High Court (they did not appeal). They are also unhappy that they had no right to have the case reviewed internally.

Eddie Doyle, managing director of financial claims company Refund.ie, has also met the couple.

He remarked on ‘‘the large number of apparent errors’’ in the documentation originating from the bank, and the inconsistencies in the comments and observations of the bank’s representative.

‘‘One would have imagined that these anomalies would have triggered some form of verbal examination of both parties by the adjudicator before arriving at a final decision," he said.

The Dunnes feel it would be unwise to take legal action on their own as it would be too expensive to redress a loss of €48,000. They are going public in the hope that anyone who has had a similar experience will contact them.

It is believed there may be others who suffered even bigger losses than the Dunnes, as Bank of Ireland launched a second Financials Fund in February 2008.

There was also a geared version of both funds where investors borrowed to invest in bank shares, leaving them nursing even larger losses, possibly in excess of 70 per cent.

© Thomas Crosbie Media 2011.